Risk register · entry
Q4 · Where models dieTerra / Luna collapse
An 'algorithmic' stablecoin depegged into a mint-and-burn death spiral.
The world stops matching the model. Regime change and leverage turn a small error fatal.
Why this quadrant
UST held its peg only while people wanted LUNA, and LUNA had value only while people held UST. Each was the other's collateral. That works until it does not, and when it stopped it took six days to go from a year of calm to nothing. The reclassification came later, when a 2021 bailout by Jump Trading turned out to have been kept from investors.
The record
- LUNA market cap peaked above $40 billion; UST supply near $18 billion before collapsecertain
- Anchor Protocol paid ~19.5% yield on UST deposits, subsidized at roughly $6 million/day by April 2022certain
- May 7, 2022: two addresses withdrew 375 million UST from Anchor, triggering the runlikely
- LUNA supply rose from about 1 billion to 6 trillion tokens in three days; price fell from ~$80 to fractions of a centlikely
- LUNA peaked at $119.18 on April 5, 2022certain
- Total losses across the Terra ecosystem estimated at roughly $40 billioncertain
- May 2021: Jump Trading secretly deployed capital (reported ~$62 million) to restore the UST peg, undisclosed to investorslikely
- Do Kwon pleaded guilty August 12, 2025 to conspiracy and wire fraudcertain
- Sentenced December 2025 to 15 years in prison; ordered to forfeit ~$19.3 millioncertain
- Terraform Labs and Do Kwon settled SEC civil fraud charges for $4.47 billioncertain
- Chai payment app fraud allegedly used ~$145 million in stablecoins to fake blockchain transactionsuncertain
Sources
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